An Overview of Directors, Shareholders, PSCs, and Company Secretaries in the UK
Directors, shareholders, people with significant control (PSCs), and company secretaries play essential roles in UK limited companies. But who are these individuals, and what do they do? Does every company need all of these roles?
In this post, we’ll break down each position, detailing their responsibilities and legal requirements. By the end, you’ll have a clear understanding of these four key appointments and their significance in running a limited company.
The difference between directors, shareholders, PSCs, and company secretaries
By law, every company must have at least one director and one shareholder (or a guarantor if it’s a company limited by guarantee). Directors are responsible for managing the company’s operations, while shareholders are the owners of the company.
Most companies also have people with significant control (PSCs), who exert substantial influence or control over the business. Typically, PSCs are also shareholders or guarantors of the company.
Appointing a company secretary is optional for private companies but mandatory for public limited companies (PLCs). Company secretaries oversee corporate compliance and governance.
While you can assign these roles to different individuals, it’s common for the same person to hold multiple positions, such as being a director, shareholder, and PSC, especially when forming a company on your own.
Company directors
Company directors are legally accountable for everything a company does, ensuring it complies with the Companies Act 2006, the articles of association, and all other relevant regulations.
When forming a company and appointing a director, keep the following in mind:
- You must appoint at least one director during the company formation process.
- Directors are often shareholders in the same company.
- There is no limit to the number of directors you can appoint.
- A director can be a natural person (individual) or a corporate body (another company), but there must always be at least one individual director.
- You do not need to be a UK citizen or resident to serve as a director of a UK company.
Directors must be at least 16 years old, though some companies may require a higher minimum age as specified in their articles of association.
You cannot serve as a director if you are an undischarged bankrupt, under a Debt Relief Order (DRO), or disqualified (banned) as a director. However, in certain cases, the court may grant exceptions to these restrictions.
The role of a director carries significant responsibilities, which typically include:
- Managing the company’s daily operations
- Making decisions on behalf of the company and its members
- Overseeing financial management
- Ensuring compliance with statutory and regulatory reporting, such as filing annual accounts, tax returns, and confirmation statements
- Paying business taxes, including Corporation Tax, VAT, and employers’ PAYE
- Maintaining accurate company and accounting records
- Engaging in strategic planning and decision-making
The responsibilities and duties of a director are set out in the Companies Act 2006 and the company’s articles of association. Additionally, some companies may have shareholders’ agreements that provide further details and clarify the director’s role and responsibilities.
Shareholders
Shareholders are individuals or entities who own a company by holding at least one of its issued shares. The initial shareholders, who become members during the company formation process, are also known as subscribers.
When establishing a company and issuing shares, consider the following key points:
- A company limited by shares must have at least one shareholder.
- Each shareholder must own at least one share in the company.
- It is common for shareholders to also serve as directors of the same company.
- Shareholders are often people with significant control (PSCs) due to the dividend rights and voting rights associated with their shares.
- Companies can have as many shareholders as they want unless they include specific restrictions in their articles of association
- Shareholders can be either natural persons or corporate entities.
- You do not need to be a UK resident or citizen to be a shareholder in a UK company.
Unlike directors, private limited companies have no minimum age requirement for shareholders. This allows minors under the age of 16 to hold shares, receive dividend payments, and vote on company matters. However, some companies place restrictions in their articles of association to prevent children from becoming shareholders.
The role of a shareholder typically includes:
- Investing money in a company in exchange for one or more shares.
- Appointing the initial directors during the company formation process.
- Exercising control by voting on key company decisions.
- Receiving a portion of the company’s profits through dividends.
- Assuming limited liability for the company’s debts, with personal liability limited to the nominal value of their shares, usually £1 per share.
The level of ownership and control a shareholder has in a company depends on the percentage of shares they own and the specific rights attached to those shares.
Shareholder rights can be varied by issuing different types of shares, either during or after the company formation process.
Some types (classes) of shares offer only dividend rights without the ability to vote on company decisions. Others may grant voting rights, additional voting power, preferential dividends ahead of other shareholders, or even allow the company to reclaim the shares.
People with Significant Control (PSCs)
Since 30 June 2016, companies have to identify each person with significant control (PSC) and submit their details to Companies House. A PSC is an individual who holds significant influence or control over the company.
Typically, a person with significant control is someone who:
- Owns more than 25% of the company’s issued shares.
- Holds more than 25% of the company’s voting rights.
- Has the right to appoint or remove the majority of the company’s board of directors.
- Exercises, or has the right to exercise, significant influence or control over the company.
- Exercises, or has the right to exercise, significant influence or control over the activities of a trust or firm that is not a legal entity but would meet any of the above conditions if it were an individual.
In many companies, particularly those owned by one or two individuals, each member is likely to be a PSC.
In companies with multiple shareholders, only those who hold the largest percentage of shares or possess specific rights qualify as Persons with Significant Control (PSCs). Shareholders with less than 25% of the company’s shares or voting rights do not qualify as PSCs.
Directors do not automatically qualify as Persons with Significant Control (PSCs) just by performing their regular duties. A director only becomes a PSC if they also hold shares or meet one of the five specific qualifying conditions for significant control.
Company secretaries
The role of a company secretary is primarily administrative and advisory, but it carries significant responsibility. They are generally tasked with ensuring that the company and its directors comply with all applicable laws, regulations, and rules.
Key points regarding the role of a company secretary include:
- A company secretary is mandatory for public limited companies (PLCs) but optional for private limited companies, unless specified by the articles of association.
- Anyone can serve as a company secretary in a private firm, including directors, members, PSCs, and corporate bodies. However, disqualified directors, undischarged bankrupts, or the company auditor cannot be appointed to this role.
- There is no limit to the number of company secretaries a company can appoint.
- By law, company secretaries must be at least 16 years old.
The responsibilities of a company secretary are diverse and typically include:
- Filing and reporting statutory documents, such as confirmation statements, annual accounts, and tax returns.
- Maintaining statutory registers, company documents, and accounting records.
- Organising board meetings and general meetings.
- Advising directors on corporate governance and compliance matters.
While many of these duties overlap with those of directors, company secretaries are appointed by the board to provide specialized advice and support.
However, directors remain ultimately responsible for the company’s actions and must ensure that all duties are carried out in compliance with the law.
Can the same people be directors, shareholders, PSCs, and company secretaries?
Unless stated otherwise in the company’s articles of association, the same individuals can serve as directors, shareholders, PSCs, and company secretaries within the same firm.
In fact, it’s common for one person to establish a company on their own, taking on the roles of director, shareholder, and PSC. In such cases, you would own, control, and manage the entire business independently.
However, it’s less common for a director to also serve as the company secretary. This is because company secretaries are typically appointed to advise and assist directors, helping to ensure compliance and lighten their workload. Therefore, it can be counterproductive for a director to also take on the role of company secretary.
That said, there is no strict rule for how these roles must be arranged. Members and directors have the flexibility to decide the best way to set up and manage the company.
Do you have any other questions?
So, in the UK, companies must appoint directors, shareholders, PSCs (Persons with Significant Control), and optionally, company secretaries. Directors handle the company’s management and decision-making. Shareholders own the company through shares and receive dividends. PSCs are individuals or entities with significant control, holding more than 25% of shares or voting rights. Although appointing a company secretary isn’t mandatory, they can support compliance and administrative duties.
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